(Updated on 14 March to add price and details of Mighty Divine's involvement).
Germany's KGAL Investment Management has sold 60 Gracechurch Street, a £450 million office development opportunity in the City of London, to Obayashi Properties UK, a wholly owned subsidiary of Obayashi Corporation, one of Japan’s largest construction companies.
The office comprises 127,000 square feet and was built in 1997 on a prominent site in the Square Mile. It was modernised in 2010 before KGAL bought it for one of its closed-end real estate funds for £116 million. The price is thought to be £160 million.
Hong Kong investor Mighty Divine had been in talks to buy the building.
With its regular fund term ending in 2025, KGAL began to explore the sale of the fully let property last year. The 13-storey building is home to German insurer Allianz on a lease running out in 2026.
KGAL’s asset management team drew up an initial feasibility study for a high-rise £450 million development of more than 30 storeys, which was prepared by architect PLP. KGAL said: "This study helped show buyers the potential for the redevelopment of the site which sits adjacent to the ‘Tower Cluster’ in the City of London, and the prospect to create substantially more floor area than the existing asset provides."
“With a targeted approach, our transaction management team found the right buyer in Obayashi Properties UK, who recognised the potential of ‘60 Gracechurch Street’,” said André Zücker, managing director of KGAL Investment Management. “With this transaction, we once again prove how important in-house expertise and active asset management are in the real estate business”.
“Obayashi is delighted to have been able to work with KGAL to have successfully completed this transaction. For us it presents the opportunity in the City we have been seeking to fulfil our strategic business plan,” said Obayashi Properties UK director Yoshifumi Yamamoto.
KGAL was advised by Cushman & Wakefield and BCLP, Obayashi was advised by CBRE, Linklaters and Ernst & Young.